S&P Futures Faltering as Ecodata Roils Markets

2 min read

Rick Ducat

CMT
S&P 500 futures enjoyed an almost 30% climb from the lows on Oct. 27 to the all-time highs on April 1, but price recently faltered as some potentially worrisome technical developments took place. The /ES saw a consistent upward trendline beginning in early January and riding the lows since then. However, equity markets stumbled on April 4, and the /ES sank below this trendline as well as below its 21-day Exponential Moving Average amid a -1.36% decline. From there, price established lows near 5,192 for two days in a row and seemed to regain some ground. But yesterday’s Consumer Price Index report came in higher than expected and the contract plummeted 92 points (about -1.75%) in only 10 minutes, breaking the 5,192 support area but recovering to close above that level. Then today’s Producer Price Index report was lower than expected, which gave some relief to the bulls.

In addition to price giving up the 21-day EMA, the slope of this moving average has changed from upward to downward during the past few days; this is an important early sign of potential trend change. In terms of momentum, the Relative Strength Index (also known as RSI) generated a bearish signal by crossing below the 50 midline that demarcates bullish and bearish trajectory. Price also has fallen below a volume node near 5,240. This is an area of relatively heavy trading according to the yearly Volume Profile study, and typically would be viewed as a supportive area.

If things continue to worsen, the 50-day Simple Moving Average, which is currently around 5,140, could be a supportive point to watch. For potential resistance, watch the 21-day EMA around 5,228 first and then consider a short-term trendline beginning with the all-time highs and sloping down across the subsequent highs at roughly 5,260.

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